Monitor Vol 39 08_Final_Nov08.pdf - tips
Monitor Vol 39 08_Final_Nov08.pdf - tips
Monitor Vol 39 08_Final_Nov08.pdf - tips
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Industrial Policy<br />
42<br />
Trade & Industry <strong>Monitor</strong><br />
the department of economic development and tourism of the provincial<br />
government and other stakeholders with an interest and knowledge of<br />
the sector. These SPVs function effectively as sector development organisations.<br />
The objective is not merely to develop existing firms, but critically<br />
to also enhance opportunities for new entrants – notably small firms and<br />
particularly black and female owned and managed firms.<br />
The provincial government supports SPVs that are broadly representative<br />
and that have considerable legitimacy within the sector. Ideally, membership<br />
of the SPV should be diverse and include small firms. Government<br />
can have some confidence that policy proposals that emanate from such<br />
associations are likely to have broad legitimacy within the sector. The task<br />
of government is to support those proposals that will develop the sector<br />
in a manner that accords with governmental objectives of both growth<br />
and equity.<br />
The principal role of the SPVs is to institutionalise the exchange of information<br />
between the private sector and government. The SPVs allow for<br />
government to obtain information as to firms’ future investments and the<br />
factors that are promoting and restraining investment activity. They are<br />
the institutional mechanism through which potential policies to support<br />
the sector are discussed and debated and ultimately presented to the<br />
provincial government for assistance.<br />
Moreover, the role of the SPVs is not confined to discussing policy proposals.<br />
SPVs may well engage directly in implementation. The provincial<br />
government may grant funding support for a proposal that emanates from<br />
an SPV and task that organisation with ensuring that the programme is<br />
carried out and that the funding is spent effectively. Governmental capacities<br />
are not solely limited in terms of policy formulation. Arguably, an<br />
even more critical constraint lies in government’s capacity to implement.<br />
SPVs, or other institutional forms of sector organisation, “… can carry<br />
much of the burden of industrial policy – both in its design and in its<br />
implementation, thus economising on limited governmental capacities.”<br />
(Kaplan, 2006).<br />
As regards funding, the MEDS favours a co-funding mechanism. Since<br />
many of the market failures are partial rather than total, some of the funding<br />
support can and should come from the beneficiaries themselves. Thus,<br />
in regard to training for example, since firms will gain at least some of the<br />
benefits of training expenditures, government support for training programmes<br />
can be partial. This limits the deployment of government fiscal<br />
resources. At the same time, this gives government a significant measure<br />
of security that public monies are being spent in projects to which the intended<br />
beneficiaries, who possess far more information than government<br />
as to their real development needs, are prepared to commit their own<br />
resources (Western Cape Government, Department of Economic Development<br />
and Tourism, 2005: 136).<br />
The institutional design proposed here is certainly not free of risk. The<br />
capacities required of government are still far from trivial. The danger<br />
of governmental capture, always real, may be enhanced where a close<br />
relationship is cultivated with business associations and where, in addition,<br />
government capacities are weak. But, however this is structured<br />
institutionally, in the present context in South Africa, the design and development<br />
of effective industrial policy will necessitate a major role for<br />
business.<br />
Institutional arrangements will necessarily evolve and change over time.<br />
It is of critical importance that the institutional design of industrial policy<br />
embodies feedback mechanisms and structured monitoring and evaluation,<br />
something that has been largely lacking from previous policies. This<br />
will enable governmental capacities to grow with experience - a version of<br />
learning by doing (Western Cape Government, Department of Economic<br />
Development, 2005: Chapter 6). As its own capacities enhance and develop,<br />
government will then be in a position to be more effective and also<br />
more adventurous in advancing its industrial policies.<br />
References<br />
Alves, P. and Kaplan. D. (2004) South Africa’s Declining Export Shares: The<br />
Developing Country Challenge Trade and Industry <strong>Monitor</strong> (June) vol. 30<br />
pps. 2-6.<br />
Accelerated and Shared Growth Initiative South Africa (ASGISA) (2006)<br />
Background Document. Media Briefing by the Deputy President Pumzile<br />
Mlambo- Ngcuka. A Summary. (February 6)<br />
Chang, H. J. (1996) The Political Economy of Industrial Policy Macmillan,<br />
London.<br />
Department of Economic Development, Western Cape (2005). Micro-economic<br />
Development Strategy for the Western Cape. Synthesis Report. Version<br />
1. July. Department of Economic Development, Western Cape.<br />
Department of Trade and Industry (the dti) (2002) Accelerating Growth<br />
and Development. The Contribution of the Integrated Manufacturing<br />
Strategy. DTI, Pretoria.